Question: answer questions 1 and 2 fully with all work shown 1. The returns on the common stock of New Image Products are quite cyclical. In

answer questions 1 and 2 fully with all work shown

1. The returns on the common stock of New Image Products are quite cyclical. In a boom economy, the stock is expected to return 32 percent in comparison to 14 percent in a normal economy and a negative 28 percent in a recessionary period. The pepbability of a recession is 25 percent while the probability of a boom is 20 percent. What is the standard deviation of the returns on this stock? (5. points) 2. Your portfolio has a beta of 1.12. The portfolio consists of 40 percent U.S. Treasury bills, 30 percent stock A, and 30 percent stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of stock B ? ( 5 points)

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